The main market tendency today is that the US dollar is rising against its major peers and riskier assets such as stocks and oil are plummeting.
What drives the market on August 21?
- The market sentiment has switched to risk-on today as US-China relationships are getting better. The US dollar is dipping down, while riskier assets are rising.
- Yesterday US unemployment claims surprisingly surged slightly above 1.1 million, while analysts forecasted only 930 000. It marked a slowdown in the recovery of the US labor market.
- Stocks are edging higher. Nasdaq sets fresh highs almost every day. It’s mainly driven by tech stocks as Tesla and Apple reached all-time records.
- Vaccine hopes also add some optimism to the market. Pfizer and BioNTech announced that the regulatory review of the Covid-19 vaccine is scheduled for October. It proved that the significant progress has already been made, and soon the vaccine will be ready for mass use.
EUR/USD is climbing up. If it breaks out the key psychological mark at 1.1900, it may surge to the high of August 19 at 1.19500. Otherwise, if it falls below the yesterday low at 1.1830, it will open doors to the next support of 1.1800.
Gold is trading sideways. The move below the recent low of $1 925 will drive the price lower to $1 912. On the flip side, if it jumps above the high of August 14 at $1 960, it will rally further to high levels of early August at $1 980.
The mixed data from Japan came out this morning. The core CPI was worse than expectations: 0.0%, while the forecast was 0.1%. At the same time, the manufacturing PMI was 46.6, which is slightly better than anticipated 45.0. The Japanese yen is driving lower. If it crosses the 23.6% Fibonacci level of 105.55, it may drop even further to the low of July 30 of 105.15. In the opposite scenario, if it surges above the 38.2% Fibonacci level of 105.85, it may jump to the 50% Fibo level at 106.10.
Finally, let’s have a look at S&P 500. It is trading just below the all-time high of 3 390. The current risk-on sentiment may push it higher to 3 400. On the flip side, if it breaks down the low of August 20, it may fall even deeper to the low of August 12 at 3 330.
Pay attention to economic releases today. Starting from 10:15 MT time there will be French, German, European, British and US PMI reports.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.